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Is the UK's EU Referendum Good News or Bad News for the House Building Sector?

Is the UK's EU Referendum Good News or Bad News for the House Building Sector?

In last week’s briefing note we looked at the potential options available for UK Financial Services if the “Leave” vote wins on 23 June 2016.  Today we look at how the Scottish house building sector may be affected in the run up to the referendum and beyond.

Before 23 June 2016

The very fact that the referendum is looming creates uncertainty which in turn can delay decision making and impact on work flow.
We can realistically expect some companies and investors to adopt a “wait and see” approach and defer investment decisions and occupational commitments until after 23 June 2016.

What is less clear is whether the uncertainty will feed through to consumer confidence in the house building sector and cause purchasers to delay big decisions on house purchases in spring and early summer.

Record low mortgage rates and recent government initiatives (such as Help to Buy) have been great news for the sector as they have helped maintain demand for new homes.  Balanced against that, second home buyers and buy to let purchasers are looking at higher land and buildings transaction tax (LBTT) coming into effect in April 2016 which, coupled with the EU debate, may just make them think twice about investment purchases.
There is a positive to be drawn from the fact that spring is in the air and June will be with us before we know it - the early referendum date means that any initial uncertainty will only be short term.

After 23 June 2016

A vote to remain in the EU may simply see the property market settle back into its current cycle.

A vote to leave the EU will have to be followed by intense negotiations on issues such as new tariff deals and trade agreements; free movement of services, goods, and people. Successful negotiation of these issues is key for the house building sector and it remains to be seen how these costs would be affected pending the outcome of the negotiations.

Could there be good news for the rented sector if more people choose to rent at a time of uncertainty?
Interestingly there is a view emerging that whatever the outcome of the EU referendum, the implications will not be as extreme as either side of the debate currently make out.  However, economies and property markets generally do not like uncertainty which may lead to purchasers being nervous in the short to medium term while the outcome of the EU referendum is unknown and in the event of a Brexit.  

We have examined various facts around the EU referendum process, links to which can be found here.  Over the coming weeks and months, our specialists will be publishing further analysis of how their sectors may be affected if the UK votes to leave the EU, to help you understand the areas of uncertainty and assess the potential risks to your business.

Please do get in touch if you have any queries over how your business could be affected by the UK voting to leave the EU.

James Jack

Philip Mackay